SF Is the First City in the Country to Pass a Permanent Cap on Delivery App Fees

Yesterday, June 22, San Francisco became the first city in the country to pass a permanent cap on the fees that delivery apps are allowed to charge restaurants, following an unanimous vote by the San Francisco Board of Supervisors.

The permanent cap follows the emergency order passed by Mayor London Breed at the beginning of the pandemic that capped delivery fees for restaurants at 15 percent in San Francisco County, a move taken by many other major cities across the country. But that order was temporary and would only remain in place for 60 days after restaurants could resume indoor dining at 100 percent capacity — so with San Francisco fully reopened on June 15, it would have expired by August.

Even before the pandemic forced restaurants to rely solely on delivery and takeout, delivery app fees could run as high as 30 percent — a thick slice of the pie for restaurants already operating with slim margins. Now, as the industry attempts to make a comeback, the city is making it stick, and delivery apps such as DoorDash, Grubhub, and others will be required to cap fees long after the pandemic is over.

At the state level, in spring 2021, Assemblywoman Lorena Gonzalez of San Diego had proposed Bill 286, which also just passed in the state senate on June 22. But that state bill only required more fee transparency from delivery apps. Originally, it had included a statewide permanent cap, but ultimately, it only covered transparency — requiring delivery apps to provide an itemized breakdown of costs to both diners and restaurants for each transaction, clearly listing the food price, fees, tips, and commissions.

Locally in San Francisco, Supervisor Aaron Peskin first floated the idea of making the delivery cap permanent in fall 2020. Despite recently entering into alcohol treatment, Peskin was present for yesterday’s vote, which garnered 11 out of 11 votes in favor of the cap. “The reality is, emergency or not, we really have an imperative to protect independent restaurants from the exploitative and predatory practices of third-party food delivery apps that seek to extract wealth from our local economy, harming our commercial corridors, and harming workers throughout the Bay Area,” said Peskin.

Even though the cap was approved, there are several amendments still trailing, which will be taken in before the ordinance moves to Mayor London Breed’s desk for final approval. Most notably, delivery apps may still be allowed to charge restaurants more for “marketing” and “additional services,” something that DoorDash, which also owns Caviar, was already testing when they announced their new pricing tiers a few months ago. DoorDash debuted a new “basic” plan that starts at a cut of 15 percent, but it was not clear how bare-bones that tier really is, and whether restaurants would feel pressured to pay more to get better placement and promotion within the app.

Regardless, a permanent cap is a prayer answered for local restaurants, who were pleading for such action even before the pandemic. “This legislation will ensure our San Francisco restaurants can continue to operate in a financially sustainable way as they recover from the past year-plus with limited capacity and lost revenue,” Laurie Thomas, executive director of the Golden Gate Restaurant Association (GGRA), said in a statement.

Throughout the pandemic, delivery apps have added restaurants to their platforms without their consent, poured millions of dollars into opposing driver benefits, paid drivers pennies in hazard pay, threatened to raise delivery fees for customers, and ultimately raised delivery fees for customers. DoorDash went public in December, making the CEO and founders billionaires, and DoorDash’s Tony Xu is now the highest-paid CEO in the Bay Area — his total compensation for the past year was $413.67 million, per the SF Business Times.

DoorDash, Caviar, Uber Eats, and Postmates are all headquartered in San Francisco, while Grubhub is based in Chicago. So while the question of how deep of a cut delivery apps can take from struggling restaurants has been a contentious issue across the country during the pandemic, it’s always been a homegrown and hotbed issue in San Francisco, which maintains both an incredibly rich dining culture and aggressive tech growth. Temporary caps have remained in place in New York and expired in Chicago, but San Francisco appears to be the first city in the country to officially pass a permanent cap.

In response to yesterday’s vote, it remains to be seen if delivery apps will continue to try to circumvent the cap by adding different fees and raising prices for customers, as they’ve threatened many times this past year. The delivery wars are far from over. Stay tuned for updates.